Sebi directs fund houses, brokers and intermediaries to indicate such deals daily.
Mutual funds will now have to disclose inter-scheme transfers of corporate bonds on stock exchanges where they are traded. The guideline, issued by the Securities and Exchange Board of India (Sebi), will come into effect from August 10.
In a circular issued on July 31 to all exchanges, asset management companies, the Fixed Income Money Market and Derivatives Association (Fimmda) and the Association of Mutual Funds in India (Amfi), the regulator said mutual funds, brokers as well as intermediaries acting on their behalf would have to ensure that inter-scheme transfers were indicated separately daily.
Sebi has already asked authorised stock exchanges and Fimmda to put in place systems to capture such transfers. “Such trades will be distinct from other over-the-counter (OTC) trades. The dissemination of trade information shall display segregated information on OTC trades, trades on exchanges and inter-scheme transfers by mutual funds,” Sebi said.
Earlier, mutual funds used to declare this data every six months, along with their half-yearly and annual results. However, industry sources said there were a number of occasions when fund houses transferred corporate bonds from one scheme to another, say from a short-term fund to a long-term fund, because of lack of liquidity or inability of the company to pay on time.
This happened especially in last October, when a number of fund houses found themselves in trouble because of redemption pressure and lack of market for even good quality papers.
Industry experts said the move would lead to transparency and price disclosure — both important for investors.
“It will make fund houses more transparent and increase the comfort level of investors. Also, the move will discourage fund managers from playing mischief,” said Sanjay Sinha, chief executive officer of DBS Chola Mutual Fund.
Industry sources said the compliance department of most fund houses had already asked fund managers to curb inter-scheme transfers. Some of them had also banned such transfers. For fund managers, inter-scheme transfers are the best way to meet shortfalls as these transactions cannot be noticed in the immediate future.
After the October 2008 market crash, fund houses had faced redemption pressure of nearly Rs 50,000 crore in debt schemes, mostly fixed maturity plans and liquid schemes.
“Like block deals and bulk deals in equities are declared at exchanges, data of inter-scheme transfers of corporate bonds will also have to be given. This is certainly a good move for investors,” said an industry expert.
